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Kim Smith.
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Jiya024
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Professor is it possible for you to provide examples of these? As it is little difficult to conceptualise…
factors that determine the suitability of analytical procedures:
1.Precision of expectation. The auditor should consider whether a sufficiently precise expectation can be developed to be able to identify a material misstatement. If not, there is limited use in using analytical procedures.
2. Amount of difference between expected amounts and recorded amounts that is acceptable. This will depend on the level of materiality and the desired level of assurance required by the auditor.
Many thanks!
Kim Smith
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I already responded to your first query last month https://opentuition.com/topic/suitability-of-analytical-procedures
Your 2nd question is related – if the auditor develops an expectation of c. $1.6m – and the recorded amount is $2m – the SAP is not suitable (it does not provide sufficient appropriate audit evidence) if materiality is $50,000. The auditor will have no choice but perform tests of details to verify $2m.
Noah098
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maam but the difference between expected and recorded amount is only of $40000, way below the materiality level of $50000. so then why would the auditor have to conduct tests fo detail?
Kim Smith
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The difference between $2m and $1.6m is $400,000 …
Jiya024
Kim Smith
Noah098
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